The Clean Water Act targets point sources like industry, municipal and state governments, and agriculture. But municipal investments that occurred were closely connected to grants, and point estimates imply that the grant costs in our data accurately represent the actual change in spending. Optimizing consumers should equate the marginal disutility of pollution to the marginal cost of protection from pollution. None of these ratios exceeds 1, though they are closer to 1 than are the values in TableVI. Agricultural Sediment Control, Environmental Regulations, Air and Water Pollution, and Infant Mortality in India. Alternatively, the most distant travelers might be marginal. Most analyses of recent U.S. water quality regulation count little direct benefit from improving human health (Lyon and Farrow 1995; Freeman 2000; USEPA 2000a; Olmstead 2010).29. River miles * pct. After 1990, the trends approach zero. Notes. Hence decreases in acidic sulfur air pollution may have contributed to decreases in acidic water pollution. The simplest specification of column (1), which includes rivers with water quality data, implies that it cost |${\$}$|0.67 million a year to increase dissolved oxygen saturation in a river-mile by 10%; the broadest specification of column (3), which assumes every treatment plant has 25 miles of downstream waters affected, implies that it cost |${\$}$|0.53 million a year. Effects of Clean Water Act Grants on Water Pollution: Event Study Graphs. A few points are worth noting. The Clean Water Act was passed by a bi-partisan vote in the early 1970s after decades of Congress trying unsuccessfully to get the states to clean up pollution in our nation's waterways. \end{equation}, Political Internalization of Economic Externalities and Environmental Policy, What Are Cities Worth? Adler Robert W., Landman Jessica C., Cameron Diane M.. Angrist Joshua D., Pischke Jrn-Steffen, Artell Janne, Ahtiainen Heini, Pouta Eija, , Boscoe Francis P., Henry Kevin A., Zdeb Michael S., , Carson Richard T., Mitchell Robert Cameron, , Currie Janet, Zivin Joshua Graff, Meckel Katherine, Neidell Matthew, Schlenker Wolfram, , Deschenes Olivier, Greenstone Michael, Shapiro Joseph S., , Faulkner H., Green A., Pellaumail K., Weaver T., , Gianessi Leonard P., Peskin Henry M., , Jeon Yongsik, Herriges Joseph A., Kling Catherine L., Downing John, , Kahn Matthew E., Li Pei, Zhao Kaxuan, , Keiser David A., Kling Catherine L., Shapiro Joseph S., , Kling Catherine L., Phaneuf Daniel J., Zhao Jinhua, , Leggett Christopher G., Bockstael Nancy E., , Lipscomb Molly, Mobarak Ahmed Mushfiq, , Muehlenbachs Lucija, Spiller Elisheba, Timmins Christopher, , Muller Nicholas Z., Mendelsohn Robert, , Muller Nicholas Z., Mendelsohn Robert, Nordhaus William, , Olmstead Sheila M., Muehlenbachs Lucija A., Shih Jhih-Shyang, Chu Ziyan, Krupnick Alan J., , Peiser Richard B., Smith Lawrence B., , Poor P. Joan, Boyle Kevin J., Taylor Laura O., Bouchard Roy, , Smith Richard A., Alexander Richard B., Wolman M. Gordon, , Smith V. Kerry, Wolloh Carlos Valcarcel, , Steinwender Astrid, Gundacker Caludia, Wittmann Karl J., , Wu Junjie, Adams Richard M., Kling Catherine L., Tanaka Katsuya, , Oxford University Press is a department of the University of Oxford. Panels A and B show different ranges of values on their y-axes. People breathe the air quality where they live, and relocating to another airshed or some other defenses against air pollution are costly (Deschenes, Greenstone, and Shapiro 2017). Secure .gov websites use HTTPS We also discuss trends in three other groups of water quality measures: industrial pollutants, nutrients, and general measures of water quality (Online Appendix TableIV).18 All three industrial pollutants have declined rapidly. Overall, this evidence does not suggest dramatic heterogeneity in cost-effectiveness. In Panel B, the year variables are recentered around 1972. Smith and Wolloh (2012) study one measure of pollution (dissolved oxygen) in lakes beginning after the Clean Water Act and use data from one of the repositories we analyze. One general conclusion from this literature is that the effect of federal grants on local government expenditure substantially exceeds the effect of local income changes on local government expenditure (the latter is typically around 0.10). A city may spend a grant in years after it is received, so real pass-through may be lower than nominal pass-through. Annual cost to increase dissolved oxygen, Panel D: Log total value of housing stock, Copyright 2023 President and Fellows of Harvard College. In the presence of such general equilibrium changes, our estimates could be interpreted as a lower bound on willingness to pay (Banzhaf 2015). The wastewater treatment plants that are the focus of this article also receive effluent permits through the NPDES program, so our analysis of grants may also reflect NPDES permits distributed to wastewater treatment plants. Contact: joseph.shapiro@berkeley.edu, UC Berkeley, Berkeley, CA 94720, (510) 642-3345, Fax (510) 643-8911. It furthers the University's objective of excellence in research, scholarship, and education by publishing worldwide, This PDF is available to Subscribers Only. Another test comes from the fact that the 19802000 gross rent data reported in the census include utilities costs. This tells us little about the Clean Water Acts effects, however, since its investments may take time to affect water pollution, expanded during the 1970s, and may be effective even if not obvious from a national time series. Cost-effective regulation equates marginal abatement costs across sources, which requires regulating all sources. The CWA made it unlawful to discharge any pollutant from a point source into navigable waters, unless a permit was obtained: National Pollutant Discharge Elimination System (NPDES), EPA History: Federal Water Pollution Control Act Amendments of 1972, The official text of the CWA continues to be available in. Graphs show year fixed effects plus a constant from regressions that also control for monitoring site fixed effects, a day-of-year cubic polynomial, and an hour-of-day cubic polynomial, corresponding to equation (1) from the text. E[G_{py}d_{d}\cdot \epsilon _{dpy}|X_{pdy}^{^{\,\,\prime }},\eta _{pd},\eta _{py},\eta _{dwy}]=0. The Clean Water Act has protected our health for more than 40 years -- and helped our nation clean up hundreds of thousands of miles of polluted waterways. Water Pollution Control Act 1948. First, we limit regression estimates to the set of tracts reporting home values in all four years 1970, 1980, 1990, and 2000. Our estimated ratio of the change in housing costs to total grant costs may provide a lower bound on the true benefit/cost ratio of this grant program because we abstract from nonuse (existence) values, general equilibrium effects, potential changes in sewer fees, and the roughly 5% longest recreational trips. We use the following equation to assess year-by-year changes in water pollution: \begin{equation} Moreover, the share of industrial water discharge that was treated by some abatement technology grew substantially in the 1960s (U.S. Census Bureau 1971). \end{equation}, \begin{equation} 2001; Jeon etal. Under the CWA, EPA has implemented pollution control programs such as setting wastewater standards for industry. These regressions are described in equation (4) from the text. Data cover decennial census years 19702000. We find some evidence that the net benefits of Clean Water Act grants vary over space in tandem with population density and the popularity of water-based recreation. Some nutrients like ammonia and phosphorus are declining, while others like nitrates are unchanged. This assumption could also fail if changes in governments effectiveness at receiving grants are correlated with governments effectiveness at operating treatment plants. GLS estimates the effect for the average pollution reading rather than for the average plant downstream year. Ignoring such a large source of pollution can make aggregate abatement more costly. Part I: State Pollution Control Programs, The Role of Water Quality Perceptions in Modelling Lake Recreation Demand, The International Handbook on Non-Market Environmental Valuation, The Displacement of Local Spending for Pollution Control by Federal Construction Grants, American Economic Review Papers and Proceedings, Water Pollution Progress at Borders: The Role of Changes in Chinas Political Promotion Incentives, American Economic Journal: Economic Policy, The Missing Benefits of Clean Water and the Role of Mismeasured Pollution Data, The Low but Uncertain Measured Benefits of US Water Quality Policy, Proceedings of the National Academy of Sciences, Replication Data for Consequences of the Clean Water Act and the Demand for Water Quality, Evaluating Public Programs with Close Substitutes: The Case of Head Start. Lack civil or criminal penalties for violations. The Clean Water Act fight polluted water by adopting a strategy that targets point sources of water pollution. For water pollution, however, people can more easily substitute between nearby clean and dirty rivers for recreation. Some of the pernicious substances that have been found in water supply systems across the United States include: Arsenic (declared safe for drinking water by the government at twice the levels recommended by private scientists) Uranium Mercury Lead Manganese Perchlorate - a rocket fuel additive Trichloroethylene - a degreaser used in manufacturing Even without the hedonic estimates of the next section, one can combine cost-effectiveness numbers with estimates from other studies of the value of clean waters to obtain a cost-benefit analysis of these grants. The share of waters that are not fishable fell on average by about half a percentage point per year, and the share that are not swimmable fell at a similar rate (TableI, Panel A). Q_{pdy}=\gamma G_{py}d_{d}+X_{pdy}^{^{\,\,\prime }}\beta +\eta _{pd}+\eta _{py}+\eta _{dwy}+\epsilon _{pdy}. saturation increase/10, 7. The definition also includes standards for boating and drinking water that we do not analyze. The basis of the CWA was enacted in 1948 and was called the Federal Water Pollution Control Act, but the Act was significantly . This explanation is less relevant for the slowing trends in continuous variables like BOD, fecal coliforms, or TSS. This does not seem consistent with our results because it would likely create pretrends in pollution or home values, whereas we observe none. Electricity-generating units and other sources do contribute to thermal pollution in rivers, but increasing temperature is an outlier from decreasing trends in most other water pollutants. The clean water act is making sure every person has clean water to drink. Notes. Independent evidence is generally consistent with this idea. Data include balanced panel of cities over 19702001, see text for details. The Clean Water Act was produced as a means for the EPA to implement pollution control programs alongside setting water quality standards for all contaminants in surface waters. Q_{icy}=\sum _{\tau =1963}^{\tau =2001}\alpha _{\tau }1[y_{y}=\tau ]+X_{icy}^{^{\,\,\prime }}\beta +\delta _{i}+\epsilon _{icy}. FigureIV shows event study graphs, which suggest similar conclusions as these regressions. When Subsidies for Pollution Abatement Increase Total Emissions, Water Quality and Economics: Willingness to Pay, Efficiency, Cost-effectiveness, and New Research Frontiers, Handbook on the Economics of Natural Resources, Evidence of the Effects of Water Quality on Residential Land Prices, Decentralization and Pollution Spillovers: Evidence from the Re-drawing of County Borders in Brazil, Taxation with Representation: Intergovernmental Grants in a Plebiscite Democracy, An Economic Analysis of Clean Water Act Issues, Contingent Valuation of Environmental Goods, A Symphonic Approach to Water Management: The Quest for New Models of Watershed Governance, Ex Post Evaluation of an Earmarked Tax on Air Pollution, Microeconometric Strategies for Dealing with Unobservables and Endogenous Variables in Recreation Demand Models, The Housing Market Impacts of Shale Gas Development, Efficient Pollution Regulation: Getting the Prices Right, Environmental Accounting for Pollution in the United States Economy, Handling Unobserved Site Characteristics in Random Utility Models of Recreational Demand, Presidential Veto Message: Nixon Vetoes Water Pollution Act, Review of Environmental Economics & Policy, Shale Gas Development Impacts on Surface Water Quality in Pennsylvania, Homeownership Returns, Tenure Choice and Inflation, Objective versus Subjective Measures of Water Clarity in Hedonic Property Value Models, Building a National Water Quality Monitoring Program, Why Is Pollution from U.S. Manufacturing Declining? The cost-effectiveness is defined as the annual public expenditure required to decrease dissolved oxygen deficits in a river-mile by 10 percentage points or to make a river-mile fishable. This analysis, however, is subject to serious concerns about use and nonuse estimates in the underlying studies. Standard errors are clustered by watershed. Estimates come from regression specifications corresponding to TableV, columns (3) and (4). Q_{pdy} & =\sum _{\tau =-10}^{\tau =25}\gamma _{\tau }1[G_{p,y+\tau }=1]d_{d}+X_{pdy}^{^{\,\,\prime }}\beta +\eta _{pd}+\eta _{py}+\eta _{dwy}+\epsilon _{pdy}. For example, the USEPAs (2000a,b) estimate of the benefit/cost ratio of the Clean Water Act is below 1, though the EPAs preferred estimate of the benefit/cost ratio of the Clean Air Act is 42 (USEPA 1997).28. Time of day controls are a cubic polynomial in hour of day. These pass-through estimates also speak to the broader flypaper literature in public finance, so named to reflect its finding that federal government spending sticks where it hits. Researchers have estimated the pass-through of federal grants to local expenditure in education, social assistance, and other public services. See main text for description of dwelling and baseline covariates. We include all capital and operating and maintenance costs in the measure of total grant project costs. Our approach focuses on the effects of cleaning up an individual site and is not as well suited to capture the potentially distinct effects of cleaning up entire river systems. For this reason, our preferred methodology in Section IV.B to assess how Clean Water Act grants affect water pollution uses a triple-difference estimator comparing upstream and downstream areas. Beginning in 1977, grants provided a higher 85% subsidy to projects using innovative technology, such as those sending waste-water through constructed wetlands for treatment. Some studies in historic or developing country settings, where drinking water regulation is limited, relate surface water quality to health (Ebenstein 2012; Greenstone and Hanna 2014; Alsan and Goldin forthcoming). The federal government paid 75% of the capital cost for most construction projects awarded through September 1984, and 55% thereafter; local governments paid the rest of the capital costs. Annual cost to make a river-mile fishable, 8. Dependent variable is municipal sewerage capital investment. We also observe that each additional grant results in further decreases in pollution (Online Appendix TableVI), which would be a complicated story for the timing of government human capital to explain. The curve 1 describes the bid function of one type of consumer. The Clean Air Act covers essentially all major polluting sectors. Second, because the difference-in-differences specification used for home values does not use upstream areas as a counterfactual, it involves the stronger identifying assumption that areas with more and fewer grants would have had similar home price trends in the absence of the grants. Estimates appear in Online Appendix TableVIII and discussion appears in Online Appendix E.3. Finally, we can recalculate the ratios in TableVI considering only subsets of costs. Column (4) reweights estimates using the inverse of the estimated propensity score for inclusion in the balanced panel of cities. We did not use these data because they focus on 1990 and later, mainly measure pesticides, and have a small sample. Standard errors are clustered by city. Panel C estimates the effect of grants on log housing units and Panel D on the log of the total value of the housing stock. Row 5 is calculated by multiplying each grant by the parameter estimate in Online Appendix TableVI, row 13, column (2), and applying the result to all waters within 25 miles downstream of the treatment plant. Panel B includes the local copayment, and finds pass-through rates of 0.84 to 0.93 in real terms or 1.09 in nominal terms. We use the following regression to estimate the effects of Clean Water Act grants on water pollution: \begin{equation} Column (1) includes only plants analyzed in column (2) of TableII. We find similar trends for the pollutant they study in lakes, though we show that other pollutants are declining in lakes and that most pollutants are declining in other types of waters. Analysis includes homes within a given distance of downstream river segments. Fecal coliforms had the fastest rate of decrease, at 2.5% a year. The positives of the Lacey Act it is one of . They conclude that nothing has changed since 1975. Panel A estimates pass-through modestly above 1 since it excludes the required municipal copayment. 2011; Poor etal. Table provides information about pros & cons of various water quality data submission tools, for use of tribal water quality programs under Clean Water Act Section 106 Tribal grants program. We assume that housing markets are competitive and that each consumer rents one house. Dissolved oxygen deficits and the share of waters that are not fishable both decreased almost every year between 1962 and 1990 (FigureII). When we fit the change in home values, we do so both for only the balanced panel of tract-years reporting home values, and for all tract-years. In the presence of such rents, this analysis could be interpreted as a cost-effectiveness analysis from the governments perspective. 3 Pages. Online Appendix F discusses other reasons we believe have weaker support. One is to estimate hedonic regressions excluding housing units in the same city as the wastewater treatment plant. Notes. The tables separately list the different components of costs, and Section VII.C discusses possible effects of these costs on local taxes or fees. Clean Water Act Grants and Water Pollution, Steinwender, Gundacker, and Wittmann 2008, Muehlenbachs, Spiller, and Timmins (2015), U.S. Government Accountability Office 1994, https://ofmpub.epa.gov/waters10/attains_nation_cy.control, https://academic.oup.com/journals/pages/open_access/funder_policies/chorus/standard_publication_model, Receive exclusive offers and updates from Oxford Academic, 6. Has Surface Water Quality Improved since the Clean Water Act? Fourth, this analysis abstracts from general equilibrium changes. A second question is scope. See Kline and Walters (2016) for a related analysis in education. Engineering calculations in USEPA (2000c) suggest that the efficiency with which treatment plants removed pollution grew faster in the 1960s than in the 1980s or 1990s. Other sources note that these time series trends are consistent with aggregate crowding out (Jondrow and Levy 1984; CBO 1985). Event study graphs corresponding to equation (4) support these results. We now compare the ratio of a grants effect on housing values (its measured benefits) to its costs. Objective versus Subjective Assessments of Environmental Quality of Standing and Running Waters in a Large City, 1967 Census of Manufactures: Water Use in Manufacturing, National Water Quality Inventory. N1 - Macroeconomics and Monetary Economics; Industrial Structure; Growth; N3 - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and, N4 - Government, War, Law, International Relations, and, N5 - Agriculture, Natural Resources, Environment, and Extractive, N7 - Transport, Trade, Energy, Technology, and Other, O - Economic Development, Innovation, Technological Change, and, O3 - Innovation; Research and Development; Technological Change; Intellectual Property, Q - Agricultural and Natural Resource Economics; Environmental and Ecological, R - Urban, Rural, Regional, Real Estate, and Transportation, R3 - Real Estate Markets, Spatial Production Analysis, and Firm, Z1 - Cultural Economics; Economic Sociology; Economic, II. A few pieces of evidence help evaluate the relevance of these issues. Notably, almost half of this decline in state and local wastewater treatment capital spending occurred before the Clean Water Act. The point estimates imply that the benefits of the Clean Water Acts municipal grants exceed their costs if these unmeasured components of willingness to pay are three or more times the components of willingness to pay that we measure. This is potentially informative because increased taxes, sewer fees, or changes in other municipal expenditures are likely to be concentrated in the municipal authority managing the treatment plant, whereas the change in water quality is relevant for areas further downstream. The change in the value of housing is estimated by combining the regression estimates of TableV with the baseline value of housing and rents from the census. The 30-year duration of these benefits is also consistent with, though on the lower end of, engineering predictions. \end{equation*}. Letting States Do the Dirty Work: State Responsibility for Federal Environmental Regulation, Transboundary Spillovers and Decentralization of Environmental Policies, Water-Quality Trends in the Nations Rivers. Our topic is clean water and sanitation. Municipal spending data from Annual Survey of Governments and Census of Governments. A .gov website belongs to an official government organization in the United States. In this sense, the existence of the Clean Water Act did crowd out aggregate municipal investment in wastewater treatment. Open Document. The Clean Water Act addressed a classic externality. None of these subsets of grants considered has a ratio of measured benefits to costs above one, though many of the confidence regions cannot reject a ratio of 1. Log specifications would implicitly assume that the percentage change in a rivers pollution due to a grant is the same for a river with a high background concentration, which is unlikely. The Clean Water Act, by contrast, mostly ignores nonpoint pollution sources like agriculture. As we approach the formal 50 th Anniversary of the Clean Water Act (CWA) next month, the Association of Clean Water Administrators (ACWA), which represents state clean water regulatory agencies, has partnered with EPA's Office of Water to create a " Clean Water Act Success Stories Map ." The Clean Water Act's grantmaking system creates higher costs than market-based regulations, argue Keiser and Shapiro. Others relate drinking water quality directly to health (Currie etal. Most of these estimates are small and actually negative. For full access to this pdf, sign in to an existing account, or purchase an annual subscription. The decline in mercury is noteworthy given the recent controversy of the Mercury and Air Toxics Standards (MATS) policy that would regulate mercury from coal-fired power plants. TableII shows that these grants cause large and statistically significant decreases in pollution. Leads decrease of about 10% a year may be related to air pollution regulations, such as prohibiting leaded gasoline. The water can be sea water, sewage water or any other dirty water. Nutrients were not targeted in the original Clean Water Act but are a focus of current regulation. Dependent variable mean describes mean in 19621972. Considering all owner-occupied homes within 25 miles of the river, the estimated ratio of the grants aggregate effects on home values to the grants costs is 0.26. 33 U.S.C. Because no reference category is required in this kind of event study setting, where one observation can receive multiple treatments, for ease of interpretation, we recenter the graph line so the coefficient for the year before treatment ( = 1) equals 0. A fourth question involves health. The Clean Water Act (CWA) establishes the basic structure for regulating discharges of pollutants into the waters of the United States and regulating quality standards for surface waters. Third, if some grant expenditures were lost to rents (e.g., corruption), then those expenditures represent transfers and not true economic costs. As in most event study analyses, only a subset of event study indicators are observed for all grants. The share of waters that are fishable has grown by 12 percentage points since the Clean Water Act. BOD, dissolved oxygen deficits, and total suspended solids all declined at 1% to 2% a year. A review of 10 U.S. studies found pass-through estimates between 0.25 and 1.06 (Hines and Thaler 1995). Search for other works by this author on: University of California, Berkeley and National Bureau of Economic Research. This literature also finds that federal grants that require local matching funds and specify the grants purpose, both characteristics of the Clean Water Act grants, tend to have higher pass-through rates. Online Appendix TableIII shows these results and Online Appendix E.1 explains each. Standard errors are clustered by watershed. Year-by-year trends for the other pollutants in the main analysisthe share of waters that are not swimmable, BOD, fecal coliforms, and TSSshow similar patterns (Online Appendix FigureIII). With mounting public demand, Congress passed what remains one of the most popular and effective environmental laws our nation has ever had, the Clean Water Act. Column (1) reports a basic difference-in-differences regression with nominal dollars. Our estimates are consistent with no crowding out for an individual grant, but the existence of the Clean Water Act may decrease aggregate municipal investment in wastewater treatment. Estimates without the basin year controls are more positive but also more sensitive to specification, which is one indication that the specification of equation (6) provides sharper identification. Hence our preferred housing estimates come from difference-in-differences regressions analyzing homes within a 25-mile radius of river segments that are downstream of treatment plants. The U.S. Environmental Protection Agency (EPA) and the U.S. Army Corps of Engineers (Corps) final " Clean Water Rule " issued on Wednesday reduces the agencies' jurisdiction to protect waters that have been covered under the Clean Water Act (CWA) since the 1970s. Flint, Michigan, has recently had high lead levels in drinking water due to switching its water source from the Detroit River to the Flint River. The National Survey of Recreation and the Environment and its predecessor, the National Recreation Survey, do not systematically summarize trips taken and travel distances. 1251 et seq. WHAT'S AT STAKE? They give similar qualitative conclusions as the main results, though exact point estimates vary. We recognize the potential importance of nonuse values for clean surface waters and the severe challenges in accurately measuring these values.26 Other categories potentially not measured here include the value for commercial fisheries, industrial water supplies, lower treatment costs for drinking water, and safer drinking water.27 Evidence on the existence and magnitude of the benefits from these other channels is limited, though as mentioned already, recreation and aesthetics are believed to account for a large majority of the benefits of clean surface waters.

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